St. Isidore Multi-Purpose Cooperative, Inc.

April 29, 2009 BIR RULING [COOP-(M-083) 289-09] R.A. No. 6938; 008-2001 St. Isidore Multi-Purpose Cooperative, Inc. Poblacion, Burgos, Pangasinan Attention: Buenaventura Bonalos Chairman Gentlemen : This refers to your letter dated October 5, 2008 received by this Office by way of 1st Indorsement dated December 11, 2008 from Revenue District Office No. 05, Alaminos City, Pangasinan, requesting tax exemption of St. Isidore Multi-Purpose Cooperative, Inc. under the provisions of R.A. No. 6938, otherwise known as the "Cooperative Code of the Philippines". HSDCTA Documents submitted disclosed that St. Isidore Multi-Purpose Cooperative, Inc. ( "The Cooperative" for brevity) with Taxpayer Identification No. 003-166-716-000, with principal address at Poblacion, Burgos, Pangasinan is a cooperative duly registered with the Cooperative Development Authority with Registration No. DAG-2654 dated June 28, 1993; that the objectives and purposes for which it was formed are the following: 1. To encourage thrift and savings mobilization among members for capital formation; 2. To create funds in order to grant loans for productive and providential purposes to its members; 3. To provide goods and services and other requirements of the members; 4. To engage in savings and loan services; 5. To promote the cooperative as a way of life for improving the social and economic well-being of the people; 6. To do any related activity for the members' self-government, improved social and/or economic well-being under a truly just democratic society; 7. To work with the cooperative movement, non-government and government organizations, entities in the promotion and development of cooperatives and in carrying out government policies; EHCaDS 8. To undertake other activities for the effective and efficient implementation of the provisions of the Cooperative Code. and that it has submitted to this Office in support of its request and in compliance with Revenue Memorandum Circular No. 14-01 dated March 12, 2001, the following documents: 1. Certificate of Registration from CDA; 2. Articles of Cooperation & By-Laws; 3. Certificate of Good Standing valid until April 15, 2009; 4. Certifications under oath by the Chairman to the effect that the Cooperative is: a) dealing with members only; and b) that at least 25% of the net income is returned to the members in the form of interest or patronage fund. cDaEAS 5. Certification of the List of Members and their capital contributions; 6. BIR Certificate of Registration; and 7. Photocopy of the Cooperative's latest Audited Financial Statements. In reply, please be informed that Section 3.1 of Revenue Regulations No. 20-2001, provides that The Cooperative which is a duly registered cooperative dealing/transacting business with members only shall be exempt from paying the following taxes for which they are directly liable, viz. : 1. Income tax on income from operations; 2. Value-added tax (VAT) under Section 109 (M) of the Tax Code of 1997, as amended; 3. Percentage tax under Section 116 of the Tax Code of 1997; 4. Donor's tax on donations to duly accredited charitable, research and educational institutions, and reinvestment to socio-economic projects; 5. Excise tax under Title VI of the Tax Code of 1997; 6. Documentary stamps tax imposed under Title VII of the Tax Code of 1997, provided, however, that the other party to the taxable document/transaction who is not exempt shall be the one directly liable for the tax; and AcDaEH 7. Annual registration fee of P500.00 under Section 236 (B) of the Tax Code of 1997, as amended by RA 9337. However, you are not exempt from registration. However, The Cooperative is liable to pay the 12% VAT on its purchases of goods and services because the said tax is an indirect tax which can be passed on or shifted as part of the cost of the goods sold/services rendered. In case The Cooperative will distribute interest on capital, such interest shall be taxable to the recipient member and shall be declared in his income tax return for tax purposes. Furthermore, The Cooperative's interest income from currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements and royalties derived from sources within the Philippines and the interest income it derives from a depository bank under the expanded foreign currency deposit system shall be subject to the 20% and 7.5% final tax, respectively, imposed under Section * It is emphasized, however, that the exemption of the cooperative does not extend to the individual members thereof. Moreover, the cooperative shall be constituted as a withholding agent if it acts as an employer and its employees receive compensation income subject to withholding tax, or if it makes income payment to individuals or corporations subject to the withholding tax provided for in Sections 57 of the Tax Code of 1997, as amended. Furthermore, said members shall be taxed on prizes, winnings and capital gains realized on sales or exchanges of properties. Finally, The Cooperative is required to file on or before the 15th day of the fourth month following the close of its accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the year and a certificate showing that there has not been any change in the By-Laws, Articles of Cooperation, manner of activities as well as sources and disposition of income. A copy of this letter of exemption must be attached to the Annual Information Return, which it will file on or before said date. The tax exemption certificate shall be valid during such period that the cooperative is in good standing as ascertained by the CDA on an annual basis (Sec. 7, RR 20-2001). It is of course understood that The Cooperative books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether The Cooperative complies with the conditions under which it has been granted tax exemption or tax incentives or pays its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. (BIR Ruling No. ECCP-009-2003 dated December 2, 2003). IcADSE This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service